Be Debt-Free Sooner: Smart Tactics to Crush Your Student Loan Debt

Be Debt-Free Sooner: Smart Tactics to Crush Your Student Loan Debt

Be Debt-Free Sooner: Smart Tactics to Crush Your Student Loan Debt

Original report from Annie Nova

In the past three years, with federal student loan payments temporarily suspended, some borrowers may have found the relief comforting.

However, experts suggest that you might have the possibility to expedite the repayment of your student debt. Here are some tips they shared to help you achieve that goal.

According to Betsy Mayotte, President of The Institute of Student Loan Advisors, making slightly higher monthly payments than required on your student debt can have a significant impact.

Even an additional $5 per month can make a difference. However, it is crucial to inform your servicer to allocate the extra amount towards your principal balance rather than applying it to future interest and payments.

To demonstrate the effects of making extra payments, higher education expert Mark Kantrowitz provided an illustrative example.

If an individual owes $10,000 with a 5% interest rate, making an extra payment of $50 per month would reduce the repayment timeline by nearly 4 years in a 10-year plan. This would also result in saving over $1,000 in interest.

If you are uncertain about how to acquire additional funds to expedite your debt repayment, it is advisable to create a budget. Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth, a wealth management firm based in New York, suggests this approach.

“If paying off student loans is at the top of your list, scrutinize your monthly cash flow to see where you might have room to allocate more money towards them,” said Boneparth.

Avalanche, autopay method

Many student loan servicers provide borrowers with an interest rate discount when they enroll in automatic payments, according to Kantrowitz. Even a slightly reduced interest rate can contribute to expediting the repayment of your debt.

Utilizing the student loan interest deduction on your federal income tax return can lower your taxable income. Your lender reports the interest payments exceeding a certain amount to the IRS using a tax form called a 1098-E. They should also furnish you with a copy. Depending on your tax bracket and the amount of interest paid, the deduction could be valued at up to $550 per year, as noted by Kantrowitz.

If claiming the student loan interest deduction leads to a larger tax refund, you can allocate more funds toward your education debt annually. It’s worth noting that you don’t need to itemize your taxes to claim this deduction, which encompasses up to $2,500 in interest payments on all federal and most private student loans.

Discover more proven tips for self-improvement and financial freedom by diving into our comprehensive guide. Start your journey now!

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